Strategic Finance - 26

LIST OF ATTEMPTED QUESTIONS AND ANSWERS
True/False
Question Odd lots purchase is not a method of buy back of shares.
Correct Answer False
Your Answer False
Select The Blank
Question As per NOI Approach - the overall capitalization rate remains
________ for all levels of financial leverage.
Correct Answer Constant
Your Answer Constant
Multiple Choice Single Answer
Question The following method of valuation is used for listed companies
that have an active market for their shares :-
Correct Answer Market value approach
Your Answer Market value approach
Multiple Choice Single Answer
Question The main assumption in comparative analysis is the possibility of
:-
Correct Answer Combination or co-location of similar functions
Your Answer Combination or co-location of similar functions
Multiple Choice Multiple Answer
Question The budgetary records are useful for:-
Correct Answer Validating accounting costs , Providing a rationale for division of
costs , Replacing missing data
Your Answer Validating accounting costs , Providing a rationale for division of
costs , Replacing missing data
Select The Blank
Question usually credit lines are established for a period of ________.
Correct Answer 1 year
Your Answer 1 year
Strategic Finance

Multiple Choice Single Answer
Question As per the study conducted by RBI, Current assets constitute :-
Correct Answer More than 50 % of the total assets
Your Answer More than 50 % of the total assets
Select The Blank
Question Cost of ________ is more than other sources for raising short -
term finance.
Correct Answer Bank finance
Your Answer Bank finance
Match The Following
Question Correct Answer Your Answer
Diversification Growth through the
combination of firms in
unrelated fields of
business
Different or unrelated
business activity
Horizontal mergers 2 Firms operate &
compete in a similar kind
of business
2 Firms operate & compete
in a similar kind of
business
Vertical mergers Firms in different stages of
production
Firms in different stages of
production
Conglomerate mergers Different or unrelated
business activity
Growth through the
combination of firms in
unrelated fields of business
Multiple Choice Single Answer
Question in case of temporary working capital, the investment in current
assets varies with :-
Correct Answer Seasonal requirements
Your Answer Seasonal requirements
Multiple Choice Multiple Answer
Question Organisations have various records and reports from past
actions such as :-
Correct Answer Logs to record workflow , Specific costs , External and internal
audit reports
Your Answer Logs to record workflow , Specific costs , External and internal
audit reports
True/False
Question The carrying amount for current investments is the lower of cost
& fair value.
Strategic Finance

Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question A company is prohibited to buy back its own shares in the
following circumstances :-
Correct Answer Through any subsidiary company , Through any investment
company , If a company defaults in repayment of deposits or
interest due thereon
Your Answer Through any subsidiary company , Through any investment
company , If a company defaults in repayment of deposits or
interest due thereon
True/False
Question Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True
Your Answer True
Select The Blank
Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers
Your Answer Vertical Mergers
Multiple Choice Single Answer
Question As per Dorsman (1995) - financing with a high percentage of
debt prevents firms from :-
Correct Answer Investing too much
Your Answer Investing too much
Multiple Choice Single Answer
Question Estimation for determining the useful life of an asset is required
:-
Correct Answer On some reasonable basis
Your Answer On some reasonable basis
True/False
Question In market value approach, interested parties never manipulate
the stock markets.
Correct Answer False
Strategic Finance

Your Answer False
Multiple Choice Single Answer
Question Which of the following company is reaping high market valuation
due to showing human resources as an asset in its balance
sheet information?
Correct Answer Infosys
Your Answer BHEL
Multiple Choice Single Answer
Question Decrease in leverage results in increasing the :-
Correct Answer Overall cost of capital
Your Answer Overall cost of capital
Multiple Choice Single Answer
Question Suppliers of equity are interested in :-
Correct Answer High share prices
Your Answer High share prices
Match The Following
Question Correct Answer Your Answer
Free cash flow theory Enormous conflicts of
interest between
Stakeholders and
shareholders
Enormous conflicts of
interest between
Stakeholders and
shareholders
Net income approach Cost of debt & equity do
not change with a change
in leverage ratio
Cost of debt & equity do
not change with a change
in leverage ratio
Net operating income
approach
The overall capitalization
rate remains constant for
all levels of financial
leverages
The overall capitalization
rate remains constant for
all levels of financial
leverages
Modigliani - Miller Theory weighted average cost of
capital does not change
with a change in the
proportion of debt to
equity in the capital
structure
weighted average cost of
capital does not change
with a change in the
proportion of debt to equity
in the capital structure
Select The Blank
Strategic Finance

Question The date on which the announcement is made of new dividend is
called ________.
Correct Answer Declaration date
Your Answer Ex - dividend date
Multiple Choice Multiple Answer
Question The net income approach is based on following 3 assumptions :-
Correct Answer There are no taxes , Cost of debt is less than equity
capitalization rate , Use of debt doesn't change the risk
perception of investors
Your Answer There are no taxes , Cost of debt is less than equity
capitalization rate , Use of debt doesn't change the risk
perception of investors
Multiple Choice Single Answer
Question A single business segment does not include products & services
:-
Correct Answer With significantly differing risks & returns
Your Answer With significantly differing risks & returns
True/False
Question For determining exchange ratio, the model developed by Conn &
Nielson is used.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Debt suppliers main concern is :-
Correct Answer Interest & debt repayment
Your Answer Interest & debt repayment
Multiple Choice Single Answer
Question Value added analysis is a method to determine, if elements
within a process flow provide the :-
Correct Answer Values
Your Answer Values
Select The Blank
Question Investors can reduce the company related risk by diversification
of their investments in ________.
Strategic Finance

Correct Answer Shares of a large number of companies
Your Answer Shares of a large number of companies
Multiple Choice Multiple Answer
Question The 3 main types of accounting records followed by an
organisation are :-
Correct Answer Organisational accounting , Budgetary accounting , Cost
accounting
Your Answer Organisational accounting , Budgetary accounting , Cost
accounting
Multiple Choice Multiple Answer
Question The following disclosures in financial statements in relation to
investments are appropriate :-
Correct Answer The accounting policies for the determination of carrying amount
of investments , Profits & losses on disposal of current
investments , The amounts included in P & L Statement
Your Answer The accounting policies for the determination of carrying amount
of investments , Profits & losses on disposal of current
investments , The amounts included in P & L Statement
Select The Blank
Question In the shareholding pattern of a company, the promoter's holding
includes________.
Correct Answer Foreign Promoters
Your Answer Foreign Promoters
Multiple Choice Multiple Answer
Question For M & As, the acquiring firm needs industry data on :-
Correct Answer Market growth , Nature of competition , Degree of regulation
Your Answer Market growth , Marketing capabilities , Nature of competition
Multiple Choice Multiple Answer
Question The financial framework of a merger decision covers 3
interrelated aspects i.e. :-
Correct Answer Determining the firm's value , Financing techniques in mergers ,
Analysis of merger as a capital budgeting decision
Your Answer Determining the firm's value , Financing techniques in mergers ,
Analysis of merger as a capital budgeting decision
Multiple Choice Single Answer
Question According to Net Income Approach, the average cost of capital
declines as the leverage ratio :-
Correct Answer Increases
Strategic Finance

Your Answer Increases
True/False
Question A long term investment is an investment other than a current
investment.
Correct Answer True
Your Answer True
True/False
Question The capital Asset pricing model describes the pricing of assets
as well as derivatives.
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question Personnel services expenses is made up of:-
Correct Answer Personnel salaries , Cost of facilities , Training & development
budgets
Your Answer Cost of facilities , Training & development budgets
Multiple Choice Multiple Answer
Question Investments having no physical existence includes :-
Correct Answer Shares , Debentures , Bonds
Your Answer Shares , Debentures , Bonds
Select The Blank
Question the commercial paper may be issued in the multiples of
________.
Correct Answer 5 lakhs
Your Answer 5 lakhs
Multiple Choice Single Answer
Question Modigliani - Miller Theoram is based on :-
Correct Answer Perfect Capital Markets
Your Answer Perfect Capital Markets
Select The Blank
Strategic Finance

Question The most popular kind of dividend policy is one that pays a
________.
Correct Answer Regular, steady dividend
Your Answer Regular, steady dividend
Multiple Choice Multiple Answer
Question AS 13 Does not deal with :-
Correct Answer The bases for recognition of interest, dividends & rentals earned
on investments , Operating or finance leases , Investment in
mutual funds
Your Answer The bases for recognition of interest, dividends & rentals earned
on investments , Operating or finance leases , Investment in
mutual funds
True/False
Question According to NOI Approach, any capital structure is optimum.
Correct Answer True
Your Answer False
Multiple Choice Single Answer
Question One of the important assumptions for capital structure theories is
:-
Correct Answer Debt and equity are the 2 kinds of funds used by the firm
Your Answer The payout ratio is never 100 %
Multiple Choice Single Answer
Question Arbitrage means :-
Correct Answer Securities cannot sell at different prices
Your Answer Securities cannot sell at different prices
True/False
Question Short term financing is meant for funding working capital of a
company.
Correct Answer True
Your Answer True